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Financial Reporting(International)
Time allowed
Reading and planning: 15 minutesWriting: 3 hoursALL FIVE questions are compulsory and MUST be attempted.
Do NOT open this paper until instructed by the supervisor.During reading and planning time only the question paper maybe annotated. You must NOT write in your answer booklet untilinstructed by the supervisor.This question paper must not be removed from the examination hall.
Fundamentals Pilot Paper – Skills module
   P  a  p  e  r   F   7   (   I   N   T   )
The Association of Chartered Certified Accountants
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ALL FIVE questions are compulsory and MUST be attempted1
On 1 October 2005 Pumice acquired the following non-current investments:– 80% of the equity share capital of Silverton at a cost of $13.6 million– 50% of Silverton’s 10% loan notes at par– 1.6 million equity shares in Amok at a cost of $6.25 each.The summarised draft balance sheets of the three companies at 31 March 2006 are:
PumiceSilvertonAmok$’000$’000$’000
Non-current assetsProperty, plant and equipment 20,000 8,500 16,500Investments 26,000 nil 1,500 46,000 8,500 18,000Current assets 15,000 8,000 11,000 Total assets 61,000 16,500 29,000 Equity and liabilitiesEquityEquity shares of $1 each 10,000 3,000 4,000Retained earnings 37,000 8,000 20,000 47,000 11,000 24,000Non-current liabilities8% loan note 4,000 nil nil10% loan note nil 2,000 nilCurrent liabilities 10,000 3,500 5,000 Total equity and liabilities 61,000 16,500 29,000 The following information is relevant: (i) The fair values of Silverton’s assets were equal to their carrying amounts with the exception of land and plant.Silverton’s land had a fair value of $400,000 in excess of its carrying amount and plant had a fair value of $1.6million in excess of its carrying amount. The plant had a remaining life of four years (straight-line depreciation) atthe date of acquisition.(ii) In the post acquisition period Pumice sold goods to Silverton at a price of $6 million. These goods had cost Pumice$4 million. Half of these goods were still in the inventory of Silverton at 31 March 2006. Silverton had a balanceof $1.5 million owing to Pumice at 31 March 2006 which agreed with Pumice’s records.(iii) The net profit after tax for the year ended 31 March 2006 was $2 million for Silverton and $8 million for Amok.Assume profits accrued evenly throughout the year.(iv) An impairment test at 31 March 2006 concluded that consolidated goodwill was impaired by $400,000 and theinvestment in Amok was impaired by $200,000.(v) No dividends were paid during the year by any of the companies.
Required:(a) Discuss how the investments purchased by Pumice on 1 October 2005 should be treated in its consolidatedfinancial statements.
(5 marks)
(b) Prepare the consolidated balance sheet for Pumice as at 31 March 2006.
(20 marks) 
(25 marks)
 
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2
The following trial balance relates to Kala, a publicly listed company, at 31 March 2006:
$’000$’000
Land and buildings at cost (note (i)) 270,000Plant – at cost (note (i)) 156,000Investment properties – valuation at 1 April 2005 (note (i)) 90,000Purchases 78,200Operating expenses 15,500Loan interest paid 2,000Rental of leased plant (note (ii)) 22,000Dividends paid 15,000Inventory at 1 April 2005 37,800Trade receivables 53,200Revenue 278,400Income from investment property 4,500Equity shares of $1 each fully paid 150,000Retained earnings at 1 April 2005 119,5008% (actual and effective) loan note (note (iii)) 50,000Accumulated depreciation at 1 April 2005 – buildings 60,000– plant 26,000Trade payables 33,400Deferred tax 12,500Bank 5,400 739,700 739,700 The following notes are relevant:(i) The land and buildings were purchased on 1 April 1990. The cost of the land was $70 million. No land andbuildings have been purchased by Kala since that date. On 1 April 2005 Kala had its land and buildingsprofessionally valued at $80 million and $175 million respectively. The directors wish to incorporate these valuesinto the financial statements. The estimated life of the buildings was originally 50 years and the remaining life hasnot changed as a result of the valuation.Later, the valuers informed Kala that investment properties of the type Kala owned had increased in value by 7%in the year to 31 March 2006.Plant, other than leased plant (see below), is depreciated at 15% per annum using the reducing balance method.Depreciation of buildings and plant is charged to cost of sales.(ii) On 1 April 2005 Kala entered into a lease for an item of plant which had an estimated life of five years. The leaseperiod is also five years with annual rentals of $22 million payable in advance from 1 April 2005. The plant isexpected to have a nil residual value at the end of its life. If purchased this plant would have a cost of $92 millionand be depreciated on a straight-line basis. The lessor includes a finance cost of 10% per annum when calculatingannual rentals. (Note: you are not required to calculate the present value of the minimum lease payments.)(iii) The loan note was issued on 1 July 2005 with interest payable six monthly in arrears.(iv) The provision for income tax for the year to 31 March 2006 has been estimated at $28.3 million. The deferredtax provision at 31 March 2006 is to be adjusted to a credit balance of $14.1 million.(v) The inventory at 31 March 2006 was valued at $43.2 million.
Required, prepare for Kala:(a) An income statement for the year ended 31 March 2006.
(10 marks)
(b) A statement of changes in equity for the year ended 31 March 2006.
(4 marks)
(c) A balance sheet as at 31 March 2006.
(11 marks)
(25 marks)
 
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Umair Sabookh

it is helpful in prepapration of F7 exam paper, but the question, answer in kits and live question are different...:(

reply05 / 03 / 2012
Brian Vimbai Saruchera

I am looking for f5, f7 and P2 revisions kits

reply03 / 23 / 2012
seeminsonde

I need f8 & f9 Revision kits 2011 please email me

reply09 / 12 / 2011
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